The water of Llyn Stwlan, the upper reservoir of the Ffestiniog Pumped Storage Scheme in north Wales, can just be glimpsed on the right. The lower power station has four water turbines which can generate 360 MW of electricity within 60 seconds of the need arising. The size of the dam can be judged from the car parked below.Larger version

The energy that may be extracted from water is not primarily dependent on the volume of water, although the volume is critical for continuing production. It primarily depends on the difference in height between the water impoundment (or source) and the water outflow. This height difference is called the head. The amount of potential energy in water is directly proportional to the head.

Some early hydroelectric systems use the natural flow of water over an existing waterfall, with no dam needed; for example, a large amount of electricity is generated by diverting part of the water that flows over Niagara Falls. The power station constructed at Niagara Falls was one of the first examples of alternating-current electric power generation for commercial supply. The type of system used commercially throughout the world today

A typical hydro-electric scheme consists of a dam (see picture) behind which a reservoir of water is held. When electricity is in demand, valves will be released, allowing the water to flow downhill to a power station where turbines will be made to turn by the force of the water flow. Connected to generators, electricity can be produced. The water is then allowed to return to the original riverbed or a nearby river.

Currently the largest hydro electric project in the world is the Itaipu Dam with total capacity of 12,600 megawatts on the border of Brazil and Paraguay. However, on completion, China's massive "Three Gorges Dam" will be the largest. Most American engineers have refused to sanction this project, indicating that it is not structurally viable.

A variation on this idea is the pumped-storage[?] system, where a lower reservoir also exists. At peak demand times, the system generates electricity as normal. At times of lower demand the process can be reversed and the water is pumped back up into the higher holding reservoir for use at another peak period. This system is economical as it permits thermal power stations[?] to continue to operate at a constant base load that maintains operating temperature, and removes the variations from the network load. The Drakensberg Pumped Storage Scheme[?] in South Africa is used to pump water from the Tugela River[?] in Natal to the Vaal River in the Orange Free State and also provide some 2,000MW of peak control through the ability to convert 1,000MW of pumping to 1,000MW of generation.

Environmental considerations include the flooding of the dam area; the agricultural and wildlife water needs downstream; and flushing of agricultural and other run-offs from the river system.

Hydroelectric power, using the potential energy of rivers, now supplies 19% of world electricity. Apart from a few countries with an abundance of it, hydro capacity is normally applied to peak-load demand, because it is so readily stopped and started. It is not a major option for the future in the developed countries because most major sites in these countries having potential for harnessing gravity in this way are either being exploited already or are unavailable for other reasons such as environmental considerations.

The chief advantage of hydro systems is their capacity to handle seasonal (as well as daily) high peak loads. In practice the utilisation of stored water is sometimes complicated by demands for irrigation which may occur out of phase with peak electrical demands.